pricePortfolio

Compute price and sensitivities for portfolio of instruments

Syntax

[PortPrice,InstPrice,PortSens,InstSens] = pricePortfolio(inPort)

Description

[PortPrice,InstPrice,PortSens,InstSens] = pricePortfolio(inPort) calculates the price and sensitivities for a portfolio of instruments that is previously created using finportfolio.

Examples

Price Portfolio of Heterogeneous Instruments

Use finportfolio and pricePortfolio to create and price a portfolio containing a FixedBond instrument and an American Vanilla option instrument.

Create FixedBond Instrument Object

Use fininstrument to create a FixedBond instrument object.

FixB = fininstrument("FixedBond",'Maturity',datetime(2022,9,15),'CouponRate',0.05,'Name',"fixed_bond")

FixB = 
  FixedBond with properties:

                  CouponRate: 0.0500
                      Period: 2
                       Basis: 0
                EndMonthRule: 1
                   Principal: 100
    DaycountAdjustedCashFlow: 0
       BusinessDayConvention: "actual"
                    Holidays: NaT
                   IssueDate: NaT
             FirstCouponDate: NaT
              LastCouponDate: NaT
                   StartDate: NaT
                    Maturity: 15-Sep-2022
                        Name: "fixed_bond"

Create ratecurve Object

Create a ratecurve object using ratecurve.

Settle = datetime(2018,9,15);
Type = 'zero';
ZeroTimes = [calmonths(6) calyears([1 2 3 4 5 7 10 20 30])]';
ZeroRates = [0.0052 0.0055 0.0061 0.0073 0.0094 0.0119 0.0168 0.0222 0.0293 0.0307]';
ZeroDates = Settle + ZeroTimes;
 
myRC = ratecurve('zero',Settle,ZeroDates,ZeroRates)

myRC = 
  ratecurve with properties:

                 Type: "zero"
          Compounding: -1
                Basis: 0
                Dates: [10×1 datetime]
                Rates: [10×1 double]
               Settle: 15-Sep-2018
         InterpMethod: "linear"
    ShortExtrapMethod: "next"
     LongExtrapMethod: "previous"

Create Discount Pricer Object for FixedBond Instrument

Use finpricer to create a Discount pricer object and use the ratecurve object for the 'DiscountCurve' name-value pair argument.

FBPricer = finpricer("Discount",'DiscountCurve',myRC)

FBPricer = 
  Discount with properties:

    DiscountCurve: [1×1 ratecurve]

Create Vanilla Instrument Object

Use fininstrument to create an American Vanilla instrument object.

Maturity = datetime(2023,9,15);
AmericanOpt = fininstrument("Vanilla",'ExerciseDate',Maturity,'Strike',120,'ExerciseStyle',"american",'Name',"vanilla_option")

AmericanOpt = 
  Vanilla with properties:

       OptionType: "call"
    ExerciseStyle: "american"
     ExerciseDate: 15-Sep-2023
           Strike: 120
             Name: "vanilla_option"

Create BlackScholes Model Object for Vanilla Instrument

Use finmodel to create a BlackScholes model object.

BSModel = finmodel("BlackScholes",'Volatility',0.12)

BSModel = 
  BlackScholes with properties:

     Volatility: 0.1200
    Correlation: 1

Create BjerksundStensland Pricer Object for Vanilla Instrument

Use finpricer to create an analytic pricer object for the BjerksundStensland pricing method and use the ratecurve object for the 'DiscountCurve' name-value pair argument.

BJSPricer = finpricer("analytic",'Model',BSModel,'DiscountCurve',myRC,'SpotPrice',100,'DividendValue',.02,'PricingMethod',"BjerksundStensland")

BJSPricer = 
  BjerksundStensland with properties:

    DiscountCurve: [1×1 ratecurve]
            Model: [1×1 finmodel.BlackScholes]
        SpotPrice: 100
    DividendValue: 0.0200
     DividendType: "continuous"

Add the Instruments to a finportfolio Object

Create a finportfolio object using finportfolio and add the two instruments with their associated pricers to the portfolio.

f1 = finportfolio([AmericanOpt,FixB],[BJSPricer,FBPricer])

f1 = 
  finportfolio with properties:

    Instruments: [2×1 fininstrument.FinInstrument]
        Pricers: [2×1 finpricer.FinPricer]
    PricerIndex: [2×1 double]
       Quantity: [2×1 double]

Price Portfolio

Use pricePortfolio to compute the price and sensitivities for the portfolio and the instruments in the portfolio.

[PortPrice,InstPrice,PortSens,InstSens] = pricePortfolio(f1)

PortPrice = 
119.1665

InstPrice = 2×1

    3.1912
  115.9753

PortSens=1×8 table
    Price      DV01       Delta      Gamma      Lambda     Vega      Theta       Rho 
    ______    _______    _______    ________    ______    ______    ________    _____

    119.17    0.04295    0.23188    0.011522    7.2661    65.454    -0.81408    86.71

InstSens=2×8 table
                      Price      DV01       Delta      Gamma      Lambda     Vega      Theta       Rho 
                      ______    _______    _______    ________    ______    ______    ________    _____

    vanilla_option    3.1912        NaN    0.23188    0.011522    7.2661    65.454    -0.81408    86.71
    fixed_bond        115.98    0.04295        NaN         NaN       NaN       NaN         NaN      NaN

Price Portfolio of Bond and Bond Option Instruments

This example shows the workflow to create and price a portfolio of bond and bond option instruments. You can use finportfolio and pricePortfolio to price FixedBond, FixedBondOption, OptionEmbeddedFixedBond, and FloatBond instruments using an IRTree pricing method.

Create ratecurve Object

Create a ratecurve object using ratecurve.

Settle = datetime(2018, 1, 1);
 ZeroTimes = calyears(1:4)';
 ZeroRates = [0.035; 0.042147; 0.047345; 0.052707];
 ZeroDates = Settle + ZeroTimes;
 Compounding = 1;
 ZeroCurve = ratecurve("zero",Settle,ZeroDates,ZeroRates, "Compounding",Compounding)

ZeroCurve = 
  ratecurve with properties:

                 Type: "zero"
          Compounding: 1
                Basis: 0
                Dates: [4×1 datetime]
                Rates: [4×1 double]
               Settle: 01-Jan-2018
         InterpMethod: "linear"
    ShortExtrapMethod: "next"
     LongExtrapMethod: "previous"

Create Bond and Option Instruments

Use fininstrument to create a FixedBond, FixedBondOption, OptionEmbeddedFixedBond, and FloatBond instrument objects.

CDates = datetime([2020,1,1 ; 2022,1,1]);
CRates = [.0425; .0750];
CouponRate = timetable(CDates,CRates);
Maturity = datetime(2022,1,1);
Period = 1;

% Vanilla FixedBond
VBond = fininstrument("FixedBond",'Maturity',Maturity,'CouponRate',0.0425,'Period',Period,'Name',"vanilla_fixed") 

VBond = 
  FixedBond with properties:

                  CouponRate: 0.0425
                      Period: 1
                       Basis: 0
                EndMonthRule: 1
                   Principal: 100
    DaycountAdjustedCashFlow: 0
       BusinessDayConvention: "actual"
                    Holidays: NaT
                   IssueDate: NaT
             FirstCouponDate: NaT
              LastCouponDate: NaT
                   StartDate: NaT
                    Maturity: 01-Jan-2022
                        Name: "vanilla_fixed"

 % Stepped coupon bond
SBond = fininstrument("FixedBond",'Maturity',Maturity,'CouponRate',CouponRate,'Period',Period,'Name',"stepped_coupon_bond") 

SBond = 
  FixedBond with properties:

                  CouponRate: [2×1 timetable]
                      Period: 1
                       Basis: 0
                EndMonthRule: 1
                   Principal: 100
    DaycountAdjustedCashFlow: 0
       BusinessDayConvention: "actual"
                    Holidays: NaT
                   IssueDate: NaT
             FirstCouponDate: NaT
              LastCouponDate: NaT
                   StartDate: NaT
                    Maturity: 01-Jan-2022
                        Name: "stepped_coupon_bond"

% FloatBond
Spread = 0;
Reset = 1;
Float = fininstrument("FloatBond",'Maturity',Maturity,'Spread',Spread,'Reset', Reset, ...
                      'ProjectionCurve',ZeroCurve,'Name',"floatbond")

Float = 
  FloatBond with properties:

                      Spread: 0
             ProjectionCurve: [1×1 ratecurve]
                 ResetOffset: 0
                       Reset: 1
                       Basis: 0
                EndMonthRule: 1
                   Principal: 100
    DaycountAdjustedCashFlow: 0
       BusinessDayConvention: "actual"
          LatestFloatingRate: NaN
                    Holidays: NaT
                   IssueDate: NaT
             FirstCouponDate: NaT
              LastCouponDate: NaT
                   StartDate: NaT
                    Maturity: 01-Jan-2022
                        Name: "floatbond"

% Call option
Strike = 100;
ExerciseDates = datetime(2020,1,1); 
OptionType ='call';
Period = 1;
CallOption = fininstrument("FixedBondOption",'Strike',Strike,'ExerciseDate',ExerciseDates, ...
                   'OptionType',OptionType,'ExerciseStyle',"american",'Bond', VBond,'Name',"fixed_bond_option")    

CallOption = 
  FixedBondOption with properties:

       OptionType: "call"
    ExerciseStyle: "american"
     ExerciseDate: 01-Jan-2020
           Strike: 100
             Bond: [1×1 fininstrument.FixedBond]
             Name: "fixed_bond_option"

% Option for embedded bond (callable bond)
CDates = datetime([2020,1,1 ; 2022,1,1]);
CRates = [.0425; .0750];
CouponRate = timetable(CDates,CRates);
StrikeOE = [100; 100];
ExerciseDatesOE = [datetime(2020,1,1); datetime(2021,1,1)];
CallSchedule =  timetable(ExerciseDatesOE,StrikeOE,'VariableNames',{'Strike Schedule'}); 
CallableBond = fininstrument("OptionEmbeddedFixedBond", 'Maturity',Maturity, ...
                              'CouponRate',CouponRate,'Period', Period, ...
                              'CallSchedule',CallSchedule,'Name',"option_embedded_fixedbond")

CallableBond = 
  OptionEmbeddedFixedBond with properties:

                  CouponRate: [2×1 timetable]
                      Period: 1
                       Basis: 0
                EndMonthRule: 1
                   Principal: 100
    DaycountAdjustedCashFlow: 0
       BusinessDayConvention: "actual"
                    Holidays: NaT
                   IssueDate: NaT
             FirstCouponDate: NaT
              LastCouponDate: NaT
                   StartDate: NaT
                    Maturity: 01-Jan-2022
                   CallDates: [2×1 datetime]
                    PutDates: [0×1 datetime]
                CallSchedule: [2×1 timetable]
                 PutSchedule: [0×0 timetable]
           CallExerciseStyle: "american"
            PutExerciseStyle: [0×0 string]
                        Name: "option_embedded_fixedbond"

Create HullWhite Model

Use finmodel to create a HullWhite model object.

VolCurve = 0.01;
AlphaCurve = 0.1;

HWModel = finmodel("hullwhite",'alpha',AlphaCurve,'sigma',VolCurve)

HWModel = 
  HullWhite with properties:

    Alpha: 0.1000
    Sigma: 0.0100

Create IRTree Pricer for HullWhite Model

Use finpricer to create an IRTree pricer object for a HullWhite model and use the ratecurve object for the 'DiscountCurve' name-value pair argument.

HWTreePricer = finpricer("IRTree",'Model',HWModel,'DiscountCurve',ZeroCurve,'TreeDates',ZeroDates)

HWTreePricer = 
  HWBKTree with properties:

             Tree: [1×1 struct]
        TreeDates: [4×1 datetime]
            Model: [1×1 finmodel.HullWhite]
    DiscountCurve: [1×1 ratecurve]

Create finportfolio Object and Add Callable Bond Instrument

Create a finportfolio object with the vanilla bond, stepped coupon bond, float bond, and the call option.

myportfolio = finportfolio([VBond,SBond,Float,CallOption],HWTreePricer, [1,2,2,1])

myportfolio = 
  finportfolio with properties:

    Instruments: [4×1 fininstrument.FinInstrument]
        Pricers: [1×1 finpricer.irtree.HWBKTree]
    PricerIndex: [4×1 double]
       Quantity: [4×1 double]

Use addInstrument to add the callable bond instrument to the existing portfolio.

myportfolio = addInstrument(myportfolio,CallableBond,HWTreePricer,1)

myportfolio = 
  finportfolio with properties:

    Instruments: [5×1 fininstrument.FinInstrument]
        Pricers: [1×1 finpricer.irtree.HWBKTree]
    PricerIndex: [5×1 double]
       Quantity: [5×1 double]

myportfolio.PricerIndex

ans = 5×1

     1
     1
     1
     1
     1

The PricerIndex property has a length equal to the length of instrument objects in the finportfolio object and stores the index of which pricer is used for each instrument object. In this case, because there is only one pricer, each instrument must use that pricer.

Price Portfolio

Use pricePortfolio to compute the price and sensitivities for the portfolio and the bond and option instruments in the portfolio.

format bank
[PortPrice,InstPrice,PortSens,InstSens] = pricePortfolio(myportfolio)

PortPrice = 
        600.55

InstPrice = 5×1

         96.59
        204.14
        200.00
          0.05
         99.77

PortSens=1×4 table
    Price      Delta       Gamma      Vega 
    ______    ________    _______    ______

    600.55    -1297.48    5759.65    -63.40

InstSens=5×4 table
                                 Price      Delta      Gamma      Vega 
                                 ______    _______    _______    ______

    vanilla_fixed                 96.59    -344.81    1603.49     -0.00
    stepped_coupon_bond          204.14    -725.96    3364.60      0.00
    floatbond                    200.00       0.00      -0.00     -0.00
    fixed_bond_option              0.05      -3.69      24.15     12.48
    option_embedded_fixedbond     99.77    -223.03     767.41    -75.88

Input Arguments

inPort — Portfolio object

finportfolio object

Portfolio object, previously created using finportfolio.

Data Types: object

Output Arguments

PortPrice — Price of portfolio of instruments

numeric

Price of the portfolio of instruments, returned as a numeric.

InstPrice — Instrument prices

numeric

Instrument prices, returned as a numeric.

PortSens — Portfolio sensitivities

numeric

Portfolio sensitivities, returned as a numeric.

InstSens — Instrument sensitivities

numeric

Instrument sensitivities, returned as a numeric.

Version History

Introduced in R2020a